Such a nice explanation. made so simple to understand. It helped in my CMT Exam. People are occupied with junk stuff on the internet. Channels like this are Gems.
Wow thank you soooo much you explained this concept so well that I am not gonna forget this for sure , god I wish I had a teacher like you, your students are the luckiest.
Thank you for your brilliant explanation! I spent hours reading my notes and listened to lecturer online and still not clear. I understood it after listening for 5 minutes, great work Ashley!
Amazing content and nicely explained. I would like to add a few points on the shape of the curve and why it is cuvry-linear with different slops in positive and negative quadrants. Marginal utility is steeper in the negative realm than positive as humans tend to feel greater loss for the same amount against the gain.
Awesome! Ashley, you should consider breaking down the 1000 most important econ concepts in videos, labs, data, etc. and shut the field down completely:) from the 10,000 average to well below avg. professors that have butchered the learning pedagogy in the field the last 40yrs.. you can be the Khan Academy of Econ.. Seriously.. you could teach a course in how to teach econ..
How does Prospect Theory differ from Expected Utility Theory? Also, for confirmation, if I am correct: 1) The function being relatively steep in the loss zone and relativelt horizontal in the gains zone explains loss aversion. 2) The 0,0 interval is the reference point. 3) The function being convex in the loss area and concave in the gains area explains risk aversion and risk seeking behaviour in different situations. Please correct me if I am wrong, thank you.
Ashley .. I am so fortunate to have stumbled upon this .. You are such an incredibly gifted teacher .. wanted to use this concept for a consumer behaviour problem .. is there a way to connect for further questions .. Thanks
Thank you for your videos! Your examples help me a lot in understanding the materials. In this particular video, though, I haven't understood how the mug-pen example connects to the graph. According to my understanding, holding the assigned mug or pen makes the person more attached to it (thinking it is more valuable). Hence, they wouldn't trade it for something that value less (in their perspective). I do not see how this act of trading is like moving along the graph. If it is, then what the x-axis represents here?
With the mug-pen example, people have lower value for a mug that they don't own (willingness to pay someone else to buy a mug: $3) than they do for a mug they own (willingness to sell a mug that is theirs: $5 required to give it up). So, if you move "1 mug" to the right of the origin, the utility on the graph might be $3 (or 3 utils), while "1 mug" to the left of the origin will put you at -$5 (or -5 utils).
@@AshleyHodgsonAh, it's clear now. Thank you. We expect people to value the mug and the pen equally on average. This would likely happen if we ask them to choose between pen and mug without assigning since they are framing both as gains. With assigning, however, we change the reference point, making one a gain and the other a loss. Since people do not want to trade, we know that the graph must look like that: loss is steeper than gain.
Preferring not to trade the pen for the mug because you have it, makes sense since you know how you feel about the pen, but you do not know quite how you feel about having the mug. It is not that these are not phenomena. It is the further declaration about what is rational that is questionable. The extra price you add to your bundle, is for covering the cost/risk of learning about other bundles/perhaps being wrong about its utility.
@@syremusic_ Thanks, let me get back to you. The general point here is that biases are part of our nature, and since they are, we should not be too quick to dismiss them as irrational. They may be rules of thumb that serves a greater rationality of survival. Being willing to trade something you like and know about, for something you have less information about may be a rational strategy from this perspective even if it looks arbitrary or irrational in an instance such as the one described.
The mug and pen - isn't that more an example of the endowment effect? (Owning increases perceived value and as a result, the subjects are not willing to trade for the same list value)
At the moment, I just use Thinking Fast & Slow, Thaler's Misbehaving and a couple of others in that vein. The first few times I taught it, I used the Wilkinson and Klaes textbook (www.amazon.com/Introduction-Behavioral-Economics-Nick-Wilkinson/dp/113752412X), which I thought was very helpful to begin with as an overview in the field.
This video surpassed my EXPECTATION!
You explained the concept better in 13 minutes than my lecturer managed in 3 hours. Thankyou!
Hands down, the best explanation of Prospect Theory. Thanks Ashley!
I never comment on how well things are explained in youtube videos but I had to on this one. Great job!
Explanation clearer than some professors’. Thank you.
What a fascinating concept. Impeccable explanation!
Explained the risk seeking in loss aversion excellently.
This is so clearly explained! This video should have had a lot more views than this
Such a nice explanation. made so simple to understand. It helped in my CMT Exam. People are occupied with junk stuff on the internet. Channels like this are Gems.
This is mindblowing ngl
Wow thank you soooo much you explained this concept so well that I am not gonna forget this for sure , god I wish I had a teacher like you, your students are the luckiest.
These videos are incredibly well done and helpful! Great work and I hope you keep them coming!!
Thank you for your brilliant explanation! I spent hours reading my notes and listened to lecturer online and still not clear. I understood it after listening for 5 minutes, great work Ashley!
Thanks for explaining this so precisely!
That was an exceptional summary. Thank you :-)
Beautiful teacher, beautiful topic, am very inspiring to learn. Subscribed.
Excellent explanation Ashley
Someone who can actually explain stuff. Hats off to you and keep on doing what you do best
Amazing content and nicely explained.
I would like to add a few points on the shape of the curve and why it is cuvry-linear with different slops in positive and negative quadrants.
Marginal utility is steeper in the negative realm than positive as humans tend to feel greater loss for the same amount against the gain.
Very informative. Thank you so much!
You explain things perfectly. Thanks for the videos.
Ashley you literally saved me. So clear, thanks a lot
This video had a lot of utility for me I feel like I own it. I really don't want to loose it so I saved it for free. ;)
Marvelous... Well explained..
Thank you for making the explanation so clear! :)
Thanks for a clear and easy-to understand explanation!
Day before the exam, you just saved my grade!
Awesome!
Ashley, you should consider breaking down the 1000 most important econ concepts in videos, labs, data, etc. and shut the field down completely:) from the 10,000 average to well below avg. professors that have butchered the learning pedagogy in the field the last 40yrs.. you can be the Khan Academy of Econ.. Seriously.. you could teach a course in how to teach econ..
How does Prospect Theory differ from Expected Utility Theory?
Also, for confirmation, if I am correct:
1) The function being relatively steep in the loss zone and relativelt horizontal in the gains zone explains loss aversion.
2) The 0,0 interval is the reference point.
3) The function being convex in the loss area and concave in the gains area explains risk aversion and risk seeking behaviour in different situations.
Please correct me if I am wrong, thank you.
Great video! Thanks for the easy explanations and practical examples 😊
wow, this explanation answer a lot of social and psychological questions in human behavior. At least, the ones that I think of
Ashley .. I am so fortunate to have stumbled upon this .. You are such an incredibly gifted teacher .. wanted to use this concept for a consumer behaviour problem .. is there a way to connect for further questions .. Thanks
that was so good - thank you & very helpful!
I love your channel, thank you!
Awesome explanation!!
Thank you. The examples helped a lot.
Great video, super useful
Thank you for explaining this in such easy to understand manner. My MSc prof went too much of a complicated direction
clear and concise explanation. thanks
This is amazing!!
this is very well explained! tq so much!
beautiful explanation...
This is very good, thank you.
Great explanation
Brilliant - thanks for the hard work :)
Thank you for your videos! Your examples help me a lot in understanding the materials.
In this particular video, though, I haven't understood how the mug-pen example connects to the graph. According to my understanding, holding the assigned mug or pen makes the person more attached to it (thinking it is more valuable). Hence, they wouldn't trade it for something that value less (in their perspective). I do not see how this act of trading is like moving along the graph. If it is, then what the x-axis represents here?
With the mug-pen example, people have lower value for a mug that they don't own (willingness to pay someone else to buy a mug: $3) than they do for a mug they own (willingness to sell a mug that is theirs: $5 required to give it up). So, if you move "1 mug" to the right of the origin, the utility on the graph might be $3 (or 3 utils), while "1 mug" to the left of the origin will put you at -$5 (or -5 utils).
@@AshleyHodgsonAh, it's clear now. Thank you.
We expect people to value the mug and the pen equally on average. This would likely happen if we ask them to choose between pen and mug without assigning since they are framing both as gains.
With assigning, however, we change the reference point, making one a gain and the other a loss. Since people do not want to trade, we know that the graph must look like that: loss is steeper than gain.
Amazing! Thank you so much for this!
Good teacher.
Good explanation Ashley! Could you pls shed light on Editing and Evaluation phase of the theory? Thanks…
Thank you. Very Informative
Preferring not to trade the pen for the mug because you have it, makes sense since you know how you feel about the pen, but you do not know quite how you feel about having the mug. It is not that these are not phenomena. It is the further declaration about what is rational that is questionable. The extra price you add to your bundle, is for covering the cost/risk of learning about other bundles/perhaps being wrong about its utility.
Great point! Can you recommend some material to learn more about this?
@@syremusic_ Thanks, let me get back to you. The general point here is that biases are part of our nature, and since they are, we should not be too quick to dismiss them as irrational. They may be rules of thumb that serves a greater rationality of survival. Being willing to trade something you like and know about, for something you have less information about may be a rational strategy from this perspective even if it looks arbitrary or irrational in an instance such as the one described.
Nice explanation!
Amazing!! Thank you
Thank you! really great content
you are the best . Thank you so much
So well done
Great. Kind regards from São Paulo.
its a good explanation maam. can we measure prospect theory as a secondary data what are those variables?
great explanation thank you!
The mug and pen - isn't that more an example of the endowment effect? (Owning increases perceived value and as a result, the subjects are not willing to trade for the same list value)
What Behavioral Economics textbooks are using for these courses? Thaler, Wilkinson, et al?
At the moment, I just use Thinking Fast & Slow, Thaler's Misbehaving and a couple of others in that vein. The first few times I taught it, I used the Wilkinson and Klaes textbook (www.amazon.com/Introduction-Behavioral-Economics-Nick-Wilkinson/dp/113752412X), which I thought was very helpful to begin with as an overview in the field.
@@AshleyHodgson Excellent 👍. Thank you!
Similarly, Christmas bonus : most can relate with expectation management by bosses before performance payouts ;-)
THANK YOU!
Thank you very much
really helpful thanks!!
Very good
really great！thank you！
Thank you 🙏
This covers the value function i propsect theory but not probability warping which is also important
thanks so much
Thank you
good stuff
I Love you
Replace pen and mug example with stocks of 2 diff cos, and everyone can relate
Damn I thought I was smart by taking the sure bet😂
Wow, thank you.